Brent Dips Below $91 On Poor Global Economic Growth
Brent crude oil fell to a new low on Wednesday, dropping below $91 earlier in the morning as investors worried about future demand as the global economy sagged.
The commodity was steady at $91.14 at 9:00 GMT with geopolitical tension in the Middle East completely outweighed by demand concerns.
Reuters reported that the International Monetary Fund cut its global growth outlook on Tuesday, saying that trouble in large core economies like the eurozone and Japan coupled with weaker growth in emerging markets like Brazil have the potential to wreak havoc on markets in the coming year.
The fund cut its global growth expectations for 2014 to 3.3 percent and took next year’s forecast down to 3.8 percent.
The cuts suggest that oil demand will continue to fall over the next two years as output climbs. The global supply glut has been a driving force behind dropping crude prices, something most believe that OPEC will address at its November meeting.
Although several of the organization’s members have downplayed the decline in crude prices, saying there is no need to cut back on output, most analysts believe that the group will be forced to consider pulling back if prices reach $90.
Brent prices also fell under pressure after the US Energy Information Administration lowered its price forecast for the commodity for 2015. The EIA also trimmed its global demand forecast for this year by 1.24 million barrels.
Moving forward, investors will be watching for the EIA’s report detailing U.S. oil inventories, due out later in the day.
On Tuesday, the American Petroleum Institute released its own version of the same report, which showed that U.S. stocks increased by 5.1 million barrels last week, much higher than the 1.5-million barrel build that was expected.
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